European equity markets experienced a significant uplift on Wednesday, driven by robust earnings from SAP and a notable shift in US policy rhetoric. The German software titan’s impressive performance, coupled with US President Donald Trump’s softened stance on Federal Reserve leadership and trade tariffs, provided a dual boost to investor confidence.
SAP’s shares soared by 10.6%, marking their most substantial single-day gain in six years. This surge followed the company’s announcement of a €2.5 billion adjusted operating profit for Q1 2025, surpassing analyst expectations of €2.22 billion. The growth is attributed to heightened demand for SAP’s cloud-based solutions, particularly those integrating artificial intelligence, leading to a projected annual cloud revenue between €21.6 billion and €21.9 billion. This momentum has effectively doubled SAP’s stock value over the past two years.
The positive sentiment extended across European markets, with the STOXX 600 index climbing 1.8%. Germany’s DAX index outperformed, rising by 3.1%, while France’s CAC 40 and the UK’s FTSE 100 saw gains of 2.5% and 2.2%, respectively. Investors were further encouraged by President Trump’s clarification that he had no intention of dismissing Federal Reserve Chair Jerome Powell, alleviating concerns over the Fed’s independence. Additionally, indications of potential reductions in tariffs on Chinese imports signalled a possible easing of US-China trade tensions.
In the technology sector, BE Semiconductor Industries experienced a nearly 9% increase in share value, driven by strong AI-related demand. The energy sector also saw positive movement, with BP’s shares rising 4.6% following activist investor Elliott’s increased stake in the company. Conversely, Reckitt’s shares declined by 5.1% after the company reported lower-than-expected sales growth.
Despite the market rally, underlying economic concerns persist. Eurozone PMI data indicated a contraction in private sector activity, and European companies are projected to report a 3.5% decline in Q1 earnings, marking the weakest performance in two years. These factors suggest that while investor sentiment has improved, caution remains warranted.
JPMorgan European Discovery Trust plc is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
